Tips for Trading Ascending Wedges Short with CFDs
The ascending wedge can be traded on the short side entering the trade as the stock breaks out of the pattern to the downside. Text books will tell you that this is how they should be traded, but our results do not back this up. The pattern forms when the two boundary lines that contain the price movement converge to a point. The top line slopes up, and the bottom line slopes up even steeper to meet the top line.
Ascending Wedges Best Traded Long
Ascending wedges are one of the least predictable patterns that are available to trade short. With just 32% of the patterns breaking down, ascending wedges struggle to deliver good returns when they do. The average gain is 0.02% in 8 days with less than half of the breakouts (42%) being profitable. These results are marginal and barely profitable, but selecting the right conditions can make trading ascending wedges attractive.
Refine Your Entries
Trading ascending wedges when the stock and the market are in an up trend or consolidating improves your trading results. The sector should be falling or in consolidation to make the best profits.
A breakout from an ascending wedge can occur anywhere on the way to the point of the pattern; it is not important exactly where the breakout occurs. The best trades occur with patterns that are between 5 and 30 days long.
If volume supports an ascending wedge breakout then the profitability of the trades improves. For volume to support the breakout, volume when the stock is going down should be greater than volume when the stock is going up. If the closing price is the same as the previous day prior to the breakout it is best to avoid these patterns as the stock may be illiquid. If the lows are getting lower and the highs are also falling then you will be more profitable.
Trading Ascending Wedges Can Be Profitable
You can improve your trading results by using a series of filters that have been outlined here. These filters are harsh, significantly reducing the number of trades to get good results. (1275 trades are reduced to just 74). This select group of ascending wedges delivers an average profit of 1.46% in 10 days and is profitable on 48% of the trades. Overall this makes ascending wedges possible to trade short.
Note: Statistics for this article have been provided by Patterns Trader after analyzing over 60,000 chart patterns on the Australian market from 2000 - 2008. - 23159
Ascending Wedges Best Traded Long
Ascending wedges are one of the least predictable patterns that are available to trade short. With just 32% of the patterns breaking down, ascending wedges struggle to deliver good returns when they do. The average gain is 0.02% in 8 days with less than half of the breakouts (42%) being profitable. These results are marginal and barely profitable, but selecting the right conditions can make trading ascending wedges attractive.
Refine Your Entries
Trading ascending wedges when the stock and the market are in an up trend or consolidating improves your trading results. The sector should be falling or in consolidation to make the best profits.
A breakout from an ascending wedge can occur anywhere on the way to the point of the pattern; it is not important exactly where the breakout occurs. The best trades occur with patterns that are between 5 and 30 days long.
If volume supports an ascending wedge breakout then the profitability of the trades improves. For volume to support the breakout, volume when the stock is going down should be greater than volume when the stock is going up. If the closing price is the same as the previous day prior to the breakout it is best to avoid these patterns as the stock may be illiquid. If the lows are getting lower and the highs are also falling then you will be more profitable.
Trading Ascending Wedges Can Be Profitable
You can improve your trading results by using a series of filters that have been outlined here. These filters are harsh, significantly reducing the number of trades to get good results. (1275 trades are reduced to just 74). This select group of ascending wedges delivers an average profit of 1.46% in 10 days and is profitable on 48% of the trades. Overall this makes ascending wedges possible to trade short.
Note: Statistics for this article have been provided by Patterns Trader after analyzing over 60,000 chart patterns on the Australian market from 2000 - 2008. - 23159
About the Author:
Jeff Cartridge is a private trader and created the website LearnCFDs.com A Simple Timeless Method for Huge Gains
posted by X - Men @ 10:35 AM
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